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HomeMy WebLinkAbout99-5969 equitySANDRA L. GRIGOR; ALVIN · IN THE COURT OF COMMON PLEAS OF FIRESTONE; and POPPI AL'S, · CUMBERLAND COUNTY, PENNSYLVANIA INC., : Plaintiffs : 99-5969 EQUITY VS. .. PETER KENNETH SAIL&GO and : CHRISTOPHER SAR_AGO, : individually and d~/a SARAGO · CIVIL ACTION - EQUITY BROTHERS, : Defendants : JURY TRIAL DEMANDED IN RE: PETITION FOP, PRELIMINARY IN]L~CTION BEFORE HESS, J. DECREE NISI AND NOW, this ~/'''' day of April, 2000, after hearing and careful consideration of the testimony adduced, the petition of the plaintiffs for preliminary injunction is DENIED. BY THE COURT, ess, J. Andrew J. Ostrowski, Esquire For the Plaintiffs Charles R. Gerow, Esquire For the Defendants :rlm SANDRA L. GRIGOR; ALVIN : IN THE COURT OF COMMON PLEAS OF FIRESTONE; and POPPI AL'S, : CUMBERLAND COUNTY, PENNSYLVANIA INC., : Plaintiffs : 99-5969 EQUITY · VS. ' o PETER KENNETH SARAGO and : CHRISTOPHER SARAGO, : individually and d/b/a SARAGO : CIVIL ACTION - EQUITY BROTHERS, : Defendants : JURY TRIAL DEMANDED IN RE: PETITION FOR PRELIMINARY INJUNCTION BEFORE HESS, J. MEMORANDUM OPINION AND ORDER Before the court is a petition of the plaintiffs for a preliminary injunction. The matter involves the enforcement of a covenant not to compete ancillary to an agreement settling the business affairs of the defendant, Peter Kenneth Sarago, with plaintiffs, Sandra Grigo, Alvin Firestone and Poppi Al's, Inc. On February 15, 1996, defendant, Peter Kenneth Sarago, signed an agreement which provided, in part, that he refrain from competing with Poppi Al's for a period of sixty months. A competing business would involve the manufacture or sale of pizza, particularly in connection with fundraising events. In consideration of the agreement, Sarago stood to be relieved of considerable debt to the corporation and its principals. We will not belabor the history of Poppi Al' s, Inc. nor the financial dealings of the parties. Suffice it to say that plaintiff Firestone and, to a lesser degree, plaintiff Grigor, made substantial financial contributions to the business whereas Sarago's contributions were largely in kind. In 1992, Peter K. Sarago, Alvin Firestone, and Sandra Grigor signed an agreement in which Sarago acknowledged that he had misappropriated funds and otherwise breached his duties to the 99-5969 EQUITY corporation. Sarago resigned his status as president and thereafter held the position of vice- president. Subsequent to the June agreement, Sarago remained active in the day-to-day operations of Poppi Al's and also started an unrelated business known as "Wee People Meals" which delivers prepared meals to schools and other institutions. In fact, the agreement of · February 15, 1996, specifically permits Sarago to continue to sell food, other than pizza, to certain daycare centers. The plaintiffs concede that this activity, which the defendant Peter Kenneth Sarago continues to this day, is not a violation of the noncompete clause. The plaintiffs contend that during the sixty months after February 15, 1996, Peter Kenneth Sarago has been involved with Sarago Brothers in manufacturing and selling pizza and/or soliciting fundraising business in violation of the covenant not to compete. They also observe that the current customers of Sarago Brothers include several former customers of Poppi Al's, Inc. They note also that since February of 1999, the defendants have employed Poppi Al's former production manager as their current production manager. In support of the petition for preliminary injunction, the plaintiffs allege that Ken Sarago is currently involved in the operation 'of Sarago Brothers, in viOlation of the noncompete clause. It is clear that neither Sarago Brothers nor Christopher Sarago, himself, are now subject to any noncompete clause. The issue then is whether we should preliminarily enjoin Peter Kenneth Sarago from his involvement in Sarago Brothers or in any other pizza-making enterprise. It is clear in this case that Sarago Brothers is competing with Poppi Al's and, in that regard, has taken customers from it. As we have observed, however, Sarago Brothers is not subject to a noncompete clause nor do we know of any authority whereby we can enjoin the business activities of entities who are not parties to this lawsuit. It may be that Mr. Ken Sarago's 99-5969 EQUITY activities, to the extent that he solicited any of these customers away from Poppi Al's, may entitle the latter to money damages. That, however, is not the question for today. The issue is as we have previously stated it. The general requirements with regard to the issuance of a preliminary injunction are well established. A moving party must establish that' 1) his right to relief is clear; 2) the need for relief is immediate; and 3) injury would result absent the issuance of the preliminary injunction which would be irreparable. Fedorko Properties, Inc. v. C.F. Zum & Associates, 720 A.2d 147 (Pa. Super. 1998). It is also clear that a preliminary injunction is an extraordinary remedy and should only be granted where plaintiff has clearly established the necessary elements. Hart v. O'Malle¥, 544 Pa. 315,676 A.2d 222 (1996). Because we do not believe that the plaintiffs' right to relief is clear, we decline to issue a preliminary injunction at this time. In order to be enforceable, a covenant not to compete must be' 1) ancillary to the main purpose of a lawful transaction; 2) necessary to protect the parties' legitimate interest; 3) supported by consideration; and 4) appropriately limited as to time and territory. Volunteer Firemen's Insurance Services, Inc. v. Cigna Property and Casualty Insurance Agency, 693 A.2d 1330, 1337 (1996). There are serious questions in this case as to whether these requirements for enforceability have been met. A covenant not to compete is contained in an agreement dated almost two years after Peter Kenneth Sarago left the employ of Poppi Al's. It does not appear that a "transaction" .occurred except for an offer to forgive certain indebtedness in exchange for a covenant not to compete. We have found no case where a court has held that the offer of debt forgiveness, without more, constitutes "consideration" for a covenant not to compete. 9%5969 EQUITY In addition, we agree.with the defendants that the five-year noncompetition provision is arguably unreasonable. As we have noted, the covenant was entered into two years after Mr. Sarago separated from the plaintiffs' company. According to the covenant, he would have been expected to refrain from returning to the pizza business for a total of seven years after he had left. Moreover, the defendant would have been prohibited from doing business not only in Pennsylvania but in several contiguous states and portions of New England. In the agreement of February 1996, Mr. Sarago reaffirmed liabilities to Firestone and Grigor of approximately $108,000. At the same time, he was to have executed a judgment note in the amount of $9,000. Thus, for less than $100,000, Mr. Sarago was expected to give up a means of livelihood for a period of five years. We seriously question whether that is reasonable. A period of two to three years would have been more than sufficient to permit Poppi Al's to become established in the market independent of Mr. Sarago's involvement and free from his competition. The plaintiffs also seek an injunction against the defendants based on alleged unfair trade practices and/or tortious interference with contracts between the plaintiffs and their customers. In order to make out a cause for tortious interference, the plaintiffs must establish: 1) that the acts complained of were willful and intentional; 2) that they were calculated to cause damage to the plaintiffs and their business; 3) that these were done with the unlawful purpose of causing damage and loss to the plaintiffs without right or justifiable cause on the part of the defendants; and, 4) that actual damage and loss resulted. R. P. Russo Contractors & Engineers, Inc. v. Pettinato Realty.& Development Inc., 334 Pa. Super. 72, 482 A.2d 1086 (1984). In this case, while it is tree that Sarago Brothers has contacted certain customers of the plaintiffs, this has 99-$969 EQUITY occurred, simply, as a natural result of their being in competition with the plaintiffs. As we have noted, Sarago Brothers, in which Peter Kenneth Sarago has no controlling interest, is not subject to a covenant not to compete nor can it be said that Sarago Brothers' efforts to sell more pizza is otherwise unlawful. We do not, today, reach the ultimate issues in this case which include the question of whether or not Peter Kenneth Sarago's involvement in Sarago Brothers has caused damage to the plaintiffs or even, for that matter, whether, in the end, Mr. Sarago's involvement with Sarago Brothers should be enjoined. At this stage the sole question is whether a preliminary injunction should issue based, among other things, on the clear right of the plaintiffs to relief. Because we find that that right to relief is anything but clear, the request for a preliminary injunction will be denied. DECREE NISI AND NOW, this 2. 6, ' day of April, 2000, after hearing and careful consideration of the testimony adduced, the petition of the plaintiffs for preliminary injunction is DENIED. BY THE COURT, Kevi , J. , Andrew J. Ostrowski, Esquire For the Plaintiffs 'Charles R. Gerow, Esquire For the Defendants :rlm